Why you should care about 2 power companies merging. Hint: affordability : NPR

Utility giant NextEra Energy announced plans to acquire Dominion Energy on Monday. The merger comes as electricity demand and rates rises with the AI data center expansion.

Marco Bello/Getty Images

hide caption

toggle caption

Marco Bello/Getty Images

Stay up to date with our Up First newsletter sent every weekday morning.

One of the largest electricity producers in the U.S. could grow even bigger if a proposed merger with another power company goes through.

It comes at a time when energy demand is surging due to the AI boom and there are heightened worries about rising electricity prices.

“Anytime there’s a merger there’s a worry consumers might face raising rates,” said Darrell West, a senior fellow at the Brookings Institution’s Center for Technology Innovation.

NextEra Energy said on Monday it plans to acquire Dominion Energy in a roughly $67 billion deal, The merger will require both federal and state approvals, including in Virginia, North Carolina and South Carolina. Those three states would be covered by the merged company, as well as Florida.

Overall, residential electricity rates have risen 7.4% in February compared to a year earlier and in some states the spikes are worse, according to the Energy Information Administration. Rates in Virginia grew 12.2%. Higher electricity prices have attracted the attention of politicians. Virginia Gov. Abigail Spanberger promised during her campaign to lower electricity costs and signed a bill last week to make data centers responsible for electricity costs.

NextEra sees lower prices for customers, advocates don’t see it that way

John Ketchum, NextEra Energy’s CEO, said in a press release that the larger scale and efficiencies gained from merging would translate “into more affordable electricity for our customers in the long run.” NextEra is proposing to give Dominion Energy customers in Virginia, North Carolina and South Carolina $2.25 billion in bill credits over two years.

However, Shelby Green, a research and communications manager covering the Southeast region for the Energy and Policy Institute, isn’t convinced. She said in the long run customers should expect their rates to go up and that’s what happened after a previous merger involving NextEra Energy.

“Families and small businesses can expect to pay more in their utility bill and that’s a major concern if this acquisition goes through,” Green said.

NextEra responded in an email, saying that since it acquired Gulf Power in Northwest Florida in 2019 those customers are now paying 19% less in electricity today after adjusting for inflation. The company said that both NextEra and Dominion operate in different states and are subject to different rates and regulations, which would still be the case if the merger is approved.

Natural disaster damage and power-hungry AI data centers only complicates the issue

The actual size and structure of a utility is far from the only factor deciding the cost of an electric bill. Natural disasters that damage the grid and the inflated price of equipment needed to repair power lines all drive up costs for customers. With climate change the frequency of extreme weather events has gone up.

NextEra has in the past couple of years struck deals with tech giants Google and Meta to provide electricity to their data centers. Still, it’s hard to predict how much more demand there will be from AI data centers in the future. If the electricity providers end up building too much infrastructure without the demand to match, customers could be stuck paying for the unused power.

That guessing game isn’t an easy one. One projection says data centers will comprise a massive 16% of all U.S. power consumed in 2030, while a more conservative estimate puts it at less than 7%.

Nothing is going to happen overnight – NextEra expects the deal and review will take between 12 and 18 months to complete.